Question

Which of the following statements is not correct regarding stock bonus plans?

a. Stock bonus plans allow for the current deductibility of non-cash contributions.

b. The required repurchase option for a stock bonus plan can create potential cash flow issues in the
future.

c. Stock bonus plans are generally as cost efficient to operate as profit-sharing plans or money purchase
pension plans.

d. The eligibility for a stock bonus plan could be age 20 and six months of service.

Answer 1

d. The eligibility for a stock bonus plan could be age 20 and six months of service.

Explanation:

Eligibility rules for stock bonus plans are generally the same as for other defined contribution plans.

There are only two defined contribution plan design options that impact eligibility:

1. Employee Classes
2. Waiting Periods

If an employee meets the criteria for the employee class and satisfies the waiting period, then they are eligible and should be enrolled in the plan.